How many coupon bonds would have to be issued

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Bonaqua Alison Corporation Limited is planning to issue 10-year bonds with a face value of $1,000. The current market rate for similar bonds is 6.5%. Assume that coupon payments will be semi-annual. The company is trying to decide between issuing a 7.5% coupon bond or a zero coupon bond. The company needs to raise $1 million.

Problem 1: What will be the price of the 7.5% coupon bonds?

Problem 2: How many coupon bonds would have to be issued?

Problem 3: Is the bond selling at a discount and why?

Problem 4: What will be the price of the zero coupon bonds?

Reference no: EM132919326

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